Tuesday, February 16, 2010

Pay-As-You-Go (PAYGO)

On February 12, President  Obama signed into law the Statutory Pay-As-You-Go Act of 2010.  The bill requires that any new non-emergency legislation affecting tax revenue not increase the federal deficit.  In other words, any tax reduction provisions must be paid for by other tax increases.

It is interesting to note that the following tax provisions have been exempted from PAYGO:

Extension of the 2009 Estate and Gift Tax provisions;

An Alternative Minimum Tax patch;

A permanent extension of the Section 179 increases; and

Making permanent any middle class tax cuts (i.e. reduced capital gains and dividend rates, educational incentives, elimination of limits on personal and dependency exemptions and itemized deductions, and tax rate reductions).